HCA 502 Final Exam question with answers
Direct Costs - -Are traced to cost objects, and indirect costs are allocated to cost objects
-Common bases for the allocation of indirect expenses include: - -Direct Expenses, Revenue, and
Services Delivered
-Switching from one allocation base to another will: - -Change department profitability but have no
effect on organizational profitability
-Pat Riley is a profit center manager. Generally speaking, Riley is responsible for: - -Inflow and Outflow,
maximizing the difference between actual and budgeted profit
-T/F Direct costs can be traced, while indirect costs have to be allocated - -True
-T/F Indirect costs are often allocated based on the number of services delivered by a health care
department - -True
-T/F In a profit center, the manager is responsible for revenue (inflow) and expenses (outflow) - -True
-T/F In a cost center, the manager is responsible for revenue (inflow) and expenses (outflow) - -False
-T/F One way to think of product cost is as necessary to the department, unit, and so on, to deliver the
service, while period costs are necessary to support the organization itself. - -True
-Total variable cost is a cost that: - -Changes in direct proportion with changes in activity levels
-Marginal cost is: - -The change in total cost divided by the change in total activity (or output)
-The efficient output level occurs when: - -Average fixed cost is minimized
-Cross Creek Clinic has revenue totaling $200,000. The clinic has costs totaling $100,000; 60% is variable
costs and 40% is fixed cost. What is the clinic's contribution margin, expressed in dollars? - -$140,000
-T/F The most frequent pattern of semivariable costs is the step pattern - -True
-T/F Average variable cost remains constant as volume increases but will increase at the point where
additional resources are needed to complete work - -True
-T/F An organization maximizes its profit when average total cost is minimized - -False
-T/F The manager must use judgement in analyzing mixed costs for the step method and the
predominant characteristics method. Therefore, both methods are objective. - -False
-T/F The contribution margin is computed by subtracting variable cost from net revenues - -True
-Hospital labor expenses account for between: - -60% to 69.9% of total expenses
, -When there is only enough work for 5.5 FTEs, the least expensive option would be to schedule: - -Five
full time employees and one half time employee
-Tying cost to staffing means obtaining accurate cost data from an appropriate record. For example, a
subsidiary journal may provide which of the following? - -Computation of gross earnings, regular and
overtime hours, hourly rate and base pay
-Which of the following actions can managers take to reduced labor costs? - -Scheduling hours based on
work needed to be performed, Reducing excessive employee turnover, and putting the right person in
the right job
-The IMPACT Act staffing report requirements include which of the following? - -Category of work
performed and hours of care provided by certified employees, information about employee turnover
and tenure, and information on resident census data and resident case mix
-T/F All positions have the same hours of productive and nonproductive hours over a year - -False
-T/F The metropolis health system's central administrative office employees work on a 40-hour, 5-day-
per-week schedule. Elenor and Frank share an administrative position there. Each works 20 hours per
week, for a total of 40 hours. Their hours worked equals a FTE position in the central administrative
office - -True
-T/F An example of calculation for number of employees required to fill a scheduled position is as
follows: a scheduled position requiring 7 days a week to cover equals a factor of 1.4 - -True
-T/F The scheduled position method is often used when forecasting new products and services - -True
-T/F Employee turnover is calculated as the number of new hires for all reasons except retirement
diverted by total FTEs - -False
-T/F The costs of goods sold is the sum of the beginning inventory and purchases - -False
-T/F With a perpetual inventory system, the healthcare organization physically counts the inventory on
hand and attaches costs per item to these counts in order to arrive at the ending inventory cost - -False
-T/F The economic order quantity will increase with an increase in ordering costs and decrease in the
cost of holding inventory - -True
-T/F To compute the net book value of a fixed asset, subtract the reserve for depreciation from the
original cost of the fixed asset - -True
-T/F The straight-line depreciation method divides acquisition cost less any salvage value by useful life
and multiplies this factor by net book value to calculate annual depreciation expense - -False
-Supply and depreciation expense account for - -10% to 4% of total hospital expenses
Direct Costs - -Are traced to cost objects, and indirect costs are allocated to cost objects
-Common bases for the allocation of indirect expenses include: - -Direct Expenses, Revenue, and
Services Delivered
-Switching from one allocation base to another will: - -Change department profitability but have no
effect on organizational profitability
-Pat Riley is a profit center manager. Generally speaking, Riley is responsible for: - -Inflow and Outflow,
maximizing the difference between actual and budgeted profit
-T/F Direct costs can be traced, while indirect costs have to be allocated - -True
-T/F Indirect costs are often allocated based on the number of services delivered by a health care
department - -True
-T/F In a profit center, the manager is responsible for revenue (inflow) and expenses (outflow) - -True
-T/F In a cost center, the manager is responsible for revenue (inflow) and expenses (outflow) - -False
-T/F One way to think of product cost is as necessary to the department, unit, and so on, to deliver the
service, while period costs are necessary to support the organization itself. - -True
-Total variable cost is a cost that: - -Changes in direct proportion with changes in activity levels
-Marginal cost is: - -The change in total cost divided by the change in total activity (or output)
-The efficient output level occurs when: - -Average fixed cost is minimized
-Cross Creek Clinic has revenue totaling $200,000. The clinic has costs totaling $100,000; 60% is variable
costs and 40% is fixed cost. What is the clinic's contribution margin, expressed in dollars? - -$140,000
-T/F The most frequent pattern of semivariable costs is the step pattern - -True
-T/F Average variable cost remains constant as volume increases but will increase at the point where
additional resources are needed to complete work - -True
-T/F An organization maximizes its profit when average total cost is minimized - -False
-T/F The manager must use judgement in analyzing mixed costs for the step method and the
predominant characteristics method. Therefore, both methods are objective. - -False
-T/F The contribution margin is computed by subtracting variable cost from net revenues - -True
-Hospital labor expenses account for between: - -60% to 69.9% of total expenses
, -When there is only enough work for 5.5 FTEs, the least expensive option would be to schedule: - -Five
full time employees and one half time employee
-Tying cost to staffing means obtaining accurate cost data from an appropriate record. For example, a
subsidiary journal may provide which of the following? - -Computation of gross earnings, regular and
overtime hours, hourly rate and base pay
-Which of the following actions can managers take to reduced labor costs? - -Scheduling hours based on
work needed to be performed, Reducing excessive employee turnover, and putting the right person in
the right job
-The IMPACT Act staffing report requirements include which of the following? - -Category of work
performed and hours of care provided by certified employees, information about employee turnover
and tenure, and information on resident census data and resident case mix
-T/F All positions have the same hours of productive and nonproductive hours over a year - -False
-T/F The metropolis health system's central administrative office employees work on a 40-hour, 5-day-
per-week schedule. Elenor and Frank share an administrative position there. Each works 20 hours per
week, for a total of 40 hours. Their hours worked equals a FTE position in the central administrative
office - -True
-T/F An example of calculation for number of employees required to fill a scheduled position is as
follows: a scheduled position requiring 7 days a week to cover equals a factor of 1.4 - -True
-T/F The scheduled position method is often used when forecasting new products and services - -True
-T/F Employee turnover is calculated as the number of new hires for all reasons except retirement
diverted by total FTEs - -False
-T/F The costs of goods sold is the sum of the beginning inventory and purchases - -False
-T/F With a perpetual inventory system, the healthcare organization physically counts the inventory on
hand and attaches costs per item to these counts in order to arrive at the ending inventory cost - -False
-T/F The economic order quantity will increase with an increase in ordering costs and decrease in the
cost of holding inventory - -True
-T/F To compute the net book value of a fixed asset, subtract the reserve for depreciation from the
original cost of the fixed asset - -True
-T/F The straight-line depreciation method divides acquisition cost less any salvage value by useful life
and multiplies this factor by net book value to calculate annual depreciation expense - -False
-Supply and depreciation expense account for - -10% to 4% of total hospital expenses
